C. B. Zeller

Opinions are split on whether the division needs to have any legitimate business purpose. In the most recent issue of the Journal of Pension Benefits, Larry Starr suggested splitting up the employee population by last name to avoid an audit.

You can exclude HCEs from deferring prospectively, but not retroactively. 411(d)(6) prevents cutbacks of benefits already accrued, even for HCEs.

The exact text of IRC 401(b)(2), as added by the SECURE Act, is If you have a calendar tax year, and a 10/15 tax filing deadline, then you have up until 10/15/2021 to adopt any plan that you could have adopted on 12/31/2020, this rule aside. Could you have adopted a 2/1/2020-1/31/2021 plan year on 12/31/2020? Sure. Is it a good idea? No comment. Jakyasar, have you asked your actuary about this? What do they think? I know there are some actuaries out there who read the changes made by PPA to have the effect of making the rule under 1.404(a)-14(c) obsolete. Under that reading, the deduction limit is determined for the tax year which contains the end of the plan year only. See 404(o)(1)(A).

This isn't something you can choose when you do testing. The plan document contains the definition of HCE with respect to whether the top paid group election is made or not. You have to use the definition in the plan document.

Determining if a DRO is qualified is one of the duties of the plan administrator. If the DRO does not contain enough information to divide the participant's benefit, then it might not be qualified.

This may be an inadequately drafted DRO if it does not address the division of the after-tax basis in the participant's account. Has it already been accepted as a QDRO by the plan administrator?

A plan can switch from using the counting-hours method to the elapsed time method for vesting service. However it cannot reduce any participant's vested percentage. If the OP had already worked enough hours to earn a year of vesting service under the old schedule, the change could not then make him wait until his anniversary date to keep that vesting. We don't know exactly when the switch happened, or how many hours were required under the old schedule, so this may or may not be a concern. However, the company's HR department represented to the OP that he was 100% vested, and he relied upon that representation. If the plan was properly amended and OP was not actually 100% vested, then that representation would not create an obligation for the plan to make him vested, however it could create a liability for the company who gave him incorrect information. That could explain why they are trying to settle with him outside the plan.

The plan does not lose the top heavy exemption unless any contributions other than deferrals or safe harbor contributions are actually made for the plan year. For example, a plan can permit profit sharing contributions, but if none are actually made, it can still use the top heavy exemption. In your case, if no after-tax contributions are made for a given year, then the top heavy minimum would not apply.

If an employee moves from an eligible classification to an ineligible classification, for example from division A to division B, they may be excluded prospectively. Check the plan document, as it should explain what happens when an employee moves from eligible to ineligible classification. For service-based participation conditions, the maximum permissible condition is described in IRC 410(a) - 1 year (1000 hours) of service. If an employee has completed 1000 hours of service then they may not be excluded on the basis of service. They may not be excluded merely because their hours drop below 1000 in a later year.

I've worked with Fidelity, they absolutely can do this. They might not make it easy, but it's possible. Your employer (or their third party administrator) might have to open a service request with Fidelity. If they won't do it, look at your SPD for claim procedures. You have a right to bring a claim for benefits under sec. 502 of ERISA. Hopefully just asking for this info will get your employer in line, as you mentioned no one wants to have to bring it to the courts. If they just cut you a check for $7,000, here are some of the consequences of that: It is not a plan distribution, so it can not be rolled over. If you are eligible, you could use it to make an IRA contribution (not a rollover), up to the annual limit ($6,000 plus $1,000 catch-up if you are over 50 for 2021). It is not a plan distribution, so there is no 10% early withdrawal penalty. If it is treated as wages (reported on W-2), it will be included in your income for federal and state income tax, FICA tax, etc. If it is treated as non-employee or independent contractor compensation, you could also owe self-employment taxes on it, plus you may have to file a schedule C to report the self-employment income on your 1040. Even if your employer has you sign something that you agree not to come after them for the $7,000 from the plan later on, that would be unenforceable. Both ERISA and the Internal Revenue Code have anti-alienation and anti-assignment clauses, meaning that it is impossible for you to lose your rights to money that is owed to you under the plan, even voluntarily. So you could theoretically come back for it years from now, and they could still be liable.

What your former employer should do, is restore your forfeiture and pay you from the plan. That $7,000 that was forfeited went into a "forfeiture account" in the plan, and since this was all pretty recent, chances are it's still there. If it's no longer in the forfeiture account for whatever reason, then the employer would have to write a check to Fidelity - not to you personally - for the amount that needs to be restored to your account. Either way, once the money is back with Fidelity, the employer should instruct Fidelity to restore it to your account, then they should initiate a new distribution from the plan to the same IRA custodian. This is, technically, a case of non-compliance. The good news is that the IRS provides easy-to-follow rules to fix plans when they have compliance issues, and as long as your employer does things the right way, they will not have any problems. If they try to pay you back outside of the plan it will cause bigger problems for both of you later on.

The top-25 rule does not depend on the plan's AFTAP per se. There is an AFTAP-based lump sum restriction, but it is different. The top-25 HCE rule is found in 1.401(a)(4)-5(b)(3). For this purpose, the restricted employees are the top 25 current or former most-highly paid HCEs. The rule is found in the 401(a)(4) regs and the definition of HCE is the usual definition for 401(a)(4) purposes. However, this entire paragraph in the regulations is under the heading "pre-termination restrictions." This rule is not usually meaningful upon plan termination, since you have to pay these people out regardless. If you are offering a window prior to plan termination, that might still fall under pre-termination, though.

These questions are coming back starting in 2022, if the proposal that was released a couple of days ago is finalized. It will be on the Schedule R, 5500-SF, and 5500-EZ.

https://www.irs.gov/retirement-plans/definitely-determinable-benefits

This question is outside of my area of expertise, but I will note that the Securing a Strong Retirement Act would, if passed, amend IRC 414(b) to state that community property is disregarded for purposes of determining ownership in a controlled group. So it seems that there is some intent in Congress to get rid of this, but it remains to be seen if the provision will actually end up in law. It would also state that controlled groups will not exist solely due to the existence of a minor child.

Yes. Even if she stops working for her husband's company, don't forget to look out for minor children, or community property depending on what state they're in.

An default that is a deemed distribution (not an offset) goes on 2g. An offset is an actual distribution and goes on 2e1.

What is the individual's date of birth? On what date did they cease to be a 5% owner?

Point them to the section of the plan document that says distributions will commence by the participant's required beginning date, even without the participant's consent.

An RMD can be distributed without the participant's consent. However the participant must be given the opportunity to waive the 10% federal income tax withholding. As a matter of prudence, the plan administrator might want to get the participant to complete a form, if only to ensure that the payment information is correct. If the participant in question is the plan administrator, then this step might be redundant.

The trust must have an EIN. Usually this comes up when you are opening a new account at a brokerage house, as they will need an EIN to open the account. Even if you get a EIN for the plan, you must still use the sponsor's EIN on the 5500. The only place the trust EIN will appear on the 5500 would usually be on the Schedule R, and if you're talking about small plans you wouldn't usually need to attach a Schedule R.

Belgarath is correct, "designated" beneficiary under IRS regs does not require the participant's actual designation. See reg 1.401(a)(9)-4, particularly Q&A-2. If you have access to ERISApedia.com, chapter 6 of their Qualified Plan eSource has a good discussion of this.

SECURE added qualified birth and adoption distributions, but those are limited to $5000. That notwithstanding, IRC 401(k)(2)(B) remains intact.

If he included it in the business return, it sounds like a reversion. 50% or 20% excise tax applies.

You can't aggregate plans for testing if they have different plan years. If the PS plan terminates and has a short plan year, but the DB plan has a full plan year, that's going to be a problem if they won't pass testing separately.